Exhibit 2.4
MEMBERSHIP INTEREST PURCHASE AGREEMENT
by and among
CV SCIENCES, INC.
CULTURED FOODS,
BARBARA McWHORTER,
AND
BRIAN CARL McWHORTER
DECEMBER 7, 2023
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MEMBERSHIP INTEREST PURCHASE AGREEMENT
THIS MEMBERSHIP PURCHASE AGREEMENT (this “Agreement”), dated as of December 7, 2023, is made and entered into by and among CV SCIENCES, INC., a Delaware corporation filed with the Secretary of State of Delaware, Identification Number 5374144, with its registered office in the State of California, physical address of 9530 Padgett Street, Suite 107, San Diego, CA 92126, and represented by Procopio Cory Hargreaves & Savitch LLP (the “Purchaser”), CULTURED FOODS Sp. z o.o., a limited liability company duly incorporated and existing under the laws of Poland with its registered office in Puławy, address: ul. Ignacego Mościckiego 1, 24-110 Puławy, Poland, entered into the register of entrepreneurs of the National Court Register (rejestr przedsiębiorców Krajowego Rejestru Sądowego) under KRS number 0000999723; REGON: 523562842, NIP: 7162837938 (the “Company”), represented by President of the Management Board – Barbara McWhorter and to the extent that this Agreement may be considered as an agreement between the Company and it’s member of the Management Board, the Company is represented by Joerg Grasser – a proxy appointed by the Company’s shareholders meeting resolution pursuant to Article 210 § 1 CCC, BARBARA McWHORTER PESEL, no: 78091805749, domiciled in Poland, Lesznowola, an individual (a “Barbara McWhorter”), and BRIAN CARL McWHORTER PESEL no: 78012820130, domiciled in Jupiter, Florida, United States of America, an individual (the “Member”). The Purchaser, the Company, and the Member are sometimes individually referred to herein as a “Party” and, collectively, as the “Parties.” This Agreement is made with reference to the following facts:
W I T N E S S E T H:
WHEREAS, the Member owns all of the issued and outstanding equity interests of the Company i.e. 100% of shares in the share capital of a Company (BRIAN CARL McWORTHER holds 1,000 shares in the share capital of the Company, his shares constitute in total 100% of the shares in the Company) (the “Membership Interests”);
WHEREAS, the Company is in the business of developing, manufacturing and selling plant-based food products (the “Business”);
WHEREAS, the Parties desire to enter into this Agreement pursuant to which the Member proposes to sell to the Purchaser, and the Purchaser proposes to purchase from the Member, all of the Membership Interests on the terms and subject to the conditions set forth herein (the “Acquisition”);
WHEREAS, concurrently with the consummation of the transactions contemplated hereby, Barbara McWhorter has entered into a Service Contract (the “Post-Closing Service Contract”) with the Company; and
WHEREAS, the Parties desire to make certain representations, warranties, indemnities and additional covenants in connection with the Acquisition, as set forth below.
NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants, agreements and conditions hereinafter set forth, and intending to be legally bound hereby, each Party hereby agrees:
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CONSTRUCTION; DEFINITIONS
“Accounting Firm” has the meaning set forth in Section 3.5(e).
“Affiliate(s)” of any specified Person means any other Person directly or indirectly Controlling or Controlled by or under direct or indirect common Control with such specified Person.
“Balance Sheet” means the unaudited balance sheet of the Company as of October 31, 2023 included in the Financial Statements.
“Business Day” means any day except Saturday, Sunday or any day on which banks are generally not open for business in the County of San Diego, California.
“Calculation Period” means calendar year 2024.
"CCC” or “Commercial Companies Code" means the Polish Act of 15 September 2020 - Commercial Companies Code (Journal of Laws of 2020 item 1526 as amended);
"Change of Control” shall mean (A) the sale, transfer or assignment, in one transaction or a series of related transactions, of all or substantially all of the assets of the Purchaser; (B) the sale, transfer or assignment, in one transaction or a series of related transactions, of greater than fifty percent (50%) of the voting equity interests of the Purchaser; or (C) a merger or consolidation of the Purchaser with or into any other entity of the Purchaser is not the surviving company.
“Closing” means the consummation of the transactions contemplated by this Agreement as set forth in Section 8.1 of this Agreement.
“Closing Date” means the date hereof.
“Company Benefit Plan” means each Employee Benefit Plan currently sponsored or maintained or required to be sponsored or maintained by the Company or to which the Company makes, or has any obligation to make, directly or indirectly, any contributions or with respect to which the Company has, or might have, any other liabilities.
“Company Intellectual Property” means any Intellectual Property that is owned by or licensed to the Company, including the Company Registered Intellectual Property.
“Company Registered Intellectual Property” means all of the Registered Intellectual Property owned by, or filed in the name of, the Company.
“Confidential Information” means any data or information of the Company (including trade secrets) that is valuable to the operation of the Business and not generally known to the public or competitors.
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“Control” means, when used with respect to any specified Person, the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise.
“Earn-Out Payment” means, with respect the Calculation Period, (a) $0, if the Company’s Net Revenue is less than $300,000, (b) $20,000, if the Company’s Net Revenue is at least $300,000 but is less than $400,000, (c) $50,000, if the Company’s Net Revenue is at least $400,000 but is less than $450,000, (d) $75,000, if the Company’s Net Revenue is at least $450,000 but is less than $500,000, and (e) $110,000, if the Company’s Net Revenue is at least $500,000.
“Employee Benefit Plan” means, with respect to any Person, (a) each plan, fund, program, agreement, arrangement or scheme, including each plan, fund, program, agreement, arrangement or scheme maintained or required to be maintained under applicable Law that is at any time sponsored or maintained or required to be sponsored or maintained by such Person or to which such Person makes or has made, or has or has had an obligation to make, contributions providing for employee benefits or for the remuneration, direct or indirect, of the employees, former employees, directors, managers, officers, consultants, independent contractors, contingent workers or leased employees of such Person or the dependents of any of them (whether written or oral), including each deferred compensation, bonus, incentive compensation, pension, retirement, membership interest purchase and other equity compensation plan, (b) each severance, retention or change in control plan or agreement, each plan or agreement providing health, vacation, summer hours, supplemental unemployment benefit, hospitalization insurance, medical, dental or legal benefit and (e) each other employee benefit plan, fund, program, agreement, arrangement or scheme.
“Employment Agreement” means any employment contract, consulting agreement, termination or severance agreement, salary continuation agreement, change of control agreement, non-compete agreement or any other agreement respecting the terms and conditions of employment or payment of compensation, or of a consulting or independent contractor relationship in respect to any current or former officer, employee, consultant or independent contractor.
“Environment” means any surface or ground water, drinking water supply, soil, surface or subsurface strata or medium, or the ambient air.
“Environmental Laws” means all federal, state, or local or foreign Laws relating to protection of the Environment, health and safety, including pollution control, product registration and Hazardous Materials.
“Estimated Working Capital Deficit” means the amount, if any, by which the Target Working Capital is greater than the Estimated Working Capital as set forth on the Closing Date Financial Statement.
“Estimated Working Capital Surplus” means the amount, if any, by which the Target Working Capital is less than the Estimated Working Capital as set forth on the Closing Date Financial Statement.
“Final Working Capital Statement” means the “Final Working Capital Statement” as finally determined pursuant to Section 3.5 hereof.
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“Financial Statements” means (a) the balance sheet, profit and loss account and other elements required under the Accounting Act of the Company as of the end of the fiscal year of the Company (if they have been prepared by the Company since its transformation into limited liability company) and balance sheet, profit and loss account and other elements required under the Accounting Act of the Company as of the end of the at the end of the Company's activity as a sole proprietorship, as of the end of 2021 and as of the end of 2020 (if Company was obliged to prepare them under the Accounting Act) and (b) the balance sheet of the Company and the profit and loss account the “Latest Balance Sheet”) as of October 31, 2023, for the six-month period then ended.
“GAAP” means generally accepted accounting principles in the United States of America.
“Governmental Entity” means any federal, state, local or foreign government, any political subdivision thereof, or any court, administrative or regulatory agency, department, instrumentality, body or commission or other governmental authority or agency.
“Hazardous Materials” means any waste, pollutant, contaminant, hazardous substance, toxic, ignitable, reactive or corrosive substance, hazardous waste, special waste, industrial substance, by-product, process-intermediate product or waste, asbestos or asbestos-containing materials, lead-based paint, petroleum or petroleum-derived substance or waste, chemical liquids or solids, liquid or gaseous products, or any constituent of any such substance or waste, the management, use, handling or disposal of which is in any way governed by or subject to any applicable Law.
“Indebtedness” means the aggregate of all indebtedness of the Company with respect to borrowed money, including any loans made by the Member to the Company and other loans (in either case including interest accrued thereon), deferred consideration, debts, any liabilities under acceptances, credit cards, monies due under capitalized leases or financial leases (but excluding operating leases), or for the deferred purchase price of property or services for which the Company is liable, contingently or otherwise as obligor, guarantor, or otherwise, or in respect of which the Company otherwise assures against loss, including bank debt, bank fees, shareholder debt and vendor debt, including, in each case above, any interest accrued thereon and prepayment or similar penalties and expenses which would be payable if such liability were paid in full as of the Closing Date. “Indebtedness” excludes, however, any and all amounts already included under Net Working Capital (including for purposes of determining the Estimated Working Capital Deficit/Surplus or Working Capital Deficit/Surplus), and Transaction Expenses.
“Indemnified Party” means a Purchaser Indemnified Party or a Member Indemnified Party, as applicable.
“Intellectual Property” means any or all of the following and all rights arising out of or associated therewith: (a) all patents and applications therefor and all reissues, divisions, renewals, extensions, provisionals, continuations and continuations-in-part thereof; (b) all inventions (whether patentable or not), invention disclosures, improvements, mask works, trade secrets, proprietary information, know-how, technology, technical data and customer lists, and all documentation relating to any of the foregoing throughout the world; (c) all works of authorship (whether copyrightable or not), all copyrights, copyright registrations and applications therefor, and all other rights corresponding thereto throughout the world; (d) all industrial designs and any
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registrations and applications therefor throughout the world; (e) all internet uniform resource locators, domain names, trade names, logos, slogans, designs, trade dress, common law trademarks and service marks, trademark and service mark and trade dress registrations and applications therefor throughout the world; (f) all databases and data collections and all rights therein throughout the world; (g) all moral and economic rights of authors and inventors, however denominated, throughout the world; and (h) any similar or equivalent rights to any of the foregoing anywhere in the world.
“Knowledge” with respect to the Member means (a) all facts known by Barbara McWhorter and/or Brian Carl McWhorter on the date hereof after due inquiry and diligence with respect to the matters at hand, and (b) all facts that any of the foregoing Persons should have known on the date hereof with respect to the matters at hand if such Person had made due inquiry and exercised reasonable diligence.
“Laws” means all statutes, rules, codes, regulations, restrictions, ordinances, orders, decrees, approvals, directives, judgments, injunctions, writs, awards, standards, guidelines, guidance documents, policies and decrees of, or issued by, any Governmental Entity.
“Leased Real Property” means the parcels of real property of which the Company is the lessee (together with all fixtures and improvements thereon).
“Legal Dispute” means any action, suit, arbitration or proceeding between or among the Parties and their respective Affiliates arising in connection with any disagreement, dispute, controversy or claim arising out of or relating to this Agreement or any related document.
“Licenses” means all notifications, licenses, permits (including environmental, construction and operation permits), qualifications, franchises, certificates, approvals, exemptions, classifications, registrations and other similar documents and authorizations issued by any Governmental Entity, and applications therefor.
“Liens” means all mortgages, liens, pledges, security interests, charges, claims, restrictions and encumbrances of any nature whatsoever.
“Material Adverse Effect” means any state of facts, change, event, effect or occurrence (when taken together with all other states of fact, changes, events, effects or occurrences) that is or may be reasonably likely to be materially adverse to the financial condition, results of operations, prospects, properties, assets or liabilities (including contingent liabilities) of the Company or the Business.
"McWhorter Loans" means those two certain loans in the principal amount of 100,000 PLN made by Barbara McWhorter and/or the Member, one dated August 23, 2023 and one dated December 1, 2023, respectively, and any and all other indebtedness for borrowed money owed to Barbara McWhorter and/or the Member.
“Member Indemnified Parties” means the Member and his Affiliates, each of their respective officers, directors, managers, employees, agents, and representatives and each of the heirs, executors, successors and assigns of any of the foregoing.
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“Net Revenue” means the net amount of revenue attributable to the sale of the Company’s products as recognized by the Purchaser in accordance with GAAP applied in accordance with the Purchaser’s then-existing corporate policies, less product returns, discounts (including but not limited to customer and distributor discounts), and excluding amounts invoiced for any other product, shipping, taxes, duties or similar amounts. For the avoidance of doubt, Net Revenue is recognized for the worldwide sale of the Company’s products to third parties and does not include inter-company sales from the Company to the Purchaser.
“Net Working Capital” means the Company’s current assets minus current liabilities determined in accordance with GAAP.
“Ordinary Course” means the ordinary course of business of the Company consistent with past practice.
“Permitted Liens” means (a) Liens for Taxes not yet due and payable, (b) statutory Liens of landlords, (c) Liens of carriers, warehousemen, mechanics, materialmen and repairmen incurred in the Ordinary Course and not yet delinquent, and (d) in the case of the Leased Real Property, zoning, building, or other restrictions, variances, covenants, rights of way, encumbrances, easements and other minor irregularities in title, none of which, individually or in the aggregate, (i) interfere in any material respect with the present use of or occupancy of the affected parcel by the Company, (ii) have more than an immaterial effect on the value thereof or its use or (iii) would impair the ability of such parcel to be sold, leased or subleased for its present use.
“Person” means any individual, corporation, partnership, joint venture, limited liability company, trust, unincorporated organization or Governmental Entity.
“Purchase Price” means the amount equal to the Closing Cash and the Stock Consideration, as adjusted pursuant to this Agreement, plus the Earn-Out Payment, if any, up to the aggregate amount of $535,000.
“Purchaser Indemnified Parties” means the Purchaser and its Affiliates, each of their respective officers, directors, employees, agents and representatives and each of the heirs, executors, successors and assigns of any of the foregoing.
“Receivables” means the Company’s accounts receivable as of the date of the Closing Date Financial Statement.
“Registered Intellectual Property” means all: (a) patents and patent applications (including provisional applications); (b) registered trademarks and service marks, applications to register trademarks and service marks, and trade dress, intent-to-use applications, or other registrations or applications related to trademarks and service marks and trade dress; (c) registered copyrights and applications for copyright registration; (d) domain name registrations; (e) registered mask works and applications for mask work registration; and (f) any other Intellectual Property that is the subject of an application, certificate, filing, registration or other document issued, filed with, or recorded with any federal, state, local or foreign Governmental Entity or other public body.
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“Release” means, with respect to any Hazardous Material, any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping or disposing into the Environment.
"Restriction Period” has the meaning set forth in Section 7.3(a).
“Schedule” means any schedule attached to this Agreement.
“Suppliers” means all of the Company’s suppliers and vendors during the 12-month period ended on September 30, 2023.
“Target Working Capital” means an amount equal to $50,000.00.
“Tax Return” means any report, return, declaration or other information required to be supplied to a Governmental Entity in connection with Taxes, including estimated returns, amended returns, information statements and reports of every kind with respect to Taxes.
“Taxes” or “Taxation” means any income tax, value added tax, withholding tax, social security charges, excise tax, stamp duty, tax on civil transactions, property tax, agricultural and forestry tax, customs duties and tariffs, or other like public assessment or charge of any kind whatsoever, together with any interest, penalties, additions to tax and additional amounts imposed with respect thereto (including with respect to any failure to file any return or report required for the purposes of any of them), imposed by any Tax Authority including without limitation: taxes or other charges on or with respect to income, property, sales or use; taxes or charges in the nature of excises, withholding, stamp, transfer, value added, or gains taxes and customs' duties.
"Tax Authorities” means any tax authorities, customs authorities, social security authorities and any other governmental or local or other authority whatsoever competent to impose any Taxation whether in Poland or elsewhere.
“Transaction Expenses” means the aggregate amount of all legal, accounting, financial advisory and other third party advisory or consulting fees and expenses incurred by the Company and/or the Member in connection with the transactions contemplated by this Agreement and not paid prior to the Closing Date. As a matter of clarity, Transaction Expenses shall not include (a) any of the expenses described above incurred by the Company subsequent to the Closing, and (b) any such expenses incurred by the Purchaser.
“Working Capital Deficit” means the amount, if any, by which the Estimated Working Capital is greater than the Net Working Capital, as reflected on the Closing Date Financial Statement.
“Working Capital Surplus” means the amount, if any, by which the Estimated Working Capital is less than the Net Working Capital, as reflected on the Closing Date Financial Statement.
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PURCHASE AND SALE
PURCHASE PRICE; ADJUSTMENTS
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“A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR.”
Section 3.10 Cash Payment Moment. The moment of the payment of the Closing Cash and any other cash due to the Member is the date when the pertinent amount is the date on which the Purchaser’s account is debited and not the date on which the Member’s account is credited.
REPRESENTATIONS AND WARRANTIES OF THE MEMBERS
With the assumption that the representations and warranties regarding the Company cover also the period during which the business was operated as a sole proprietorship of Brian McWhother (i.e., before that sole proprietorship was transformed into the Company), the Member hereby represents and warrants, to the Purchaser as follows:
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[INTENTIONALLY OMITTED]
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser hereby represents and warrants to the Member as follows:
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CERTAIN COVENANTS AND AGREEMENTS
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CLOSING
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INDEMNIFICATION
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The demands, claims, suits, proceedings, actions, liabilities, obligations, damages, losses costs, expenses, penalties, fines, judgments and interest (whether in equity or at law, including statutory and common) whenever arising or incurred (including amounts paid in settlement, costs of investigation and reasonable attorneys’ fees and expenses) of the Purchaser Indemnified Parties described in this Section 9.1 as to which the Purchaser Indemnified Parties are entitled to indemnification are collectively referred to as “Purchaser Losses.”
If any occurrence or circumstance, operation, action, transaction, breach, failure, obligation, liability, etc. named in this this Section 9.1 refers to the Company, it shall regard and include Brian McWhorter’s sole proprietorship prior to its conversion into the Company, to the extent the Company is a legal successor the Brian McWhorter’s sole proprietorship. The Parties exclude the Company's joint and several liability with Brian McWhorter for occurrences listed in this Section 9.1.
The demands, claims, suits, proceedings, actions, liabilities, obligations, damages, losses costs, expenses, penalties, fines, judgments and interest (whether in equity or at law, including statutory and common) whenever arising or incurred (including amounts paid in settlement, costs of investigation and reasonable attorneys’ fees and expenses) of the Member Indemnified Parties described in this Section 9.2 as to which the Member Indemnified Parties are entitled to indemnification are collectively referred to as “Member Losses.”
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Notwithstanding the foregoing, if, prior to the close of business on the last day of the applicable period to bring a claim for Losses pursuant to this Section 9.4, a party obligated to indemnify shall have been properly notified of a claim for indemnity hereunder and such claim shall not have been finally resolved or disposed of at such date, such claim shall continue to survive and shall remain a basis for indemnity hereunder until such claim is finally resolved or disposed of in accordance with the terms hereof.
MISCELLANEOUS PROVISIONS
To the Purchaser: | CV Sciences, Inc. 9530 Padgett Street, Suite 107 San Diego, California 92126 Attn: Joseph D. Dowling, CEO |
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with a copy (which shall not constitute notice) to:
To the Member:
To Barbara McWhorter: | Procopio, Cory, Hargreaves & Savitch, LLP 12544 High Bluff Drive, Suite 300 San Diego, CA 92130 Attn: John Cleary, Esq.
Brian Carl McWhorter
Barbara McWhorter
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or to such other representative or at such other address of a Party as such Party may furnish to the other Parties in writing. Any such notice, communication or delivery shall be deemed given or made (a) on the date of delivery, if delivered in person, or (b) one (1) Business Day after deposit with a national overnight courier service for next-day delivery, or (c) five (5) Business Day after deposit with the United States Postal Service, registered or certified mail (return receipt requested), postage prepaid.
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IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed, as of the date first above written, with signatures authenticated by a notary public.
| PURCHASER: CV SCIENCES, INC.
By: /s/ Joerg Grasser Name: Joerg Grasser Title: Chief Financial Officer |
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COMPANY: CULTURED FOODS
By: /s/ Barbara McWhorter Name: Barbara McWhorter Title: President of the Management Board |
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By: /s/ Joerg Grasser Name: Joerg Grasser Title: Proxy MEMBER:
/s/ Barbara McWhorter Brian Carl McWhorter - represented by Barbara McWhorter - Attorney in fact
/s/ Barbara McWhorter Barbara McWhorter
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